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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 371.65-1.1%Nov 17 4:00 PM EST
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To: Maurice Winn who wrote (109995)1/21/2015 4:34:18 PM
From: Elroy Jetson1 Recommendation  Read Replies (2) of 217841
 
U.S. government debt, as a percentage of GDP, was far larger at the end of WW-II and was quickly reduced as the economy grew.

Unfortunately the Reagan-Bush tax cuts for the wealthiest Americans have again increased the Debt to GDP ratio, while decreasing economic growth at the same time. This is a self-inflicted problem.

It's quite obvious these tax cuts have created serious problems and need to be repealed. But the hysteria some associate with public debt is greatly overblown.

Government Treasury bonds are an essential tool in a modern economy providing a safe harbor for money between investments. In economies without public debt, safe funds are invested in treasury bonds in a different currency which periodically creates large problems.

The actual problem is total debt in the economy, primarily consumer and business. Banks and other lenders were issuing this debt without adequate capital backing them. Basel-III capital requirements will solve this problem, but only if regulation enforces prudent lending rules. The recent elimination of capital requirements for bank derivative trading puts the entire system back into jeopardy.
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